My Favorite Forecasts

My Recent Locations

EPA Considers Waive of US Ethanol Mandate

By by Jillian MacMath, AccuWeather.com Online Journalist

August 27, 2012, 12:51:06 AM EDT

As a direct result of the worst drought the U.S. has seen since the dust bowl and, consequently, record-low corn yields, the pressure is on for the U.S. Environmental Protection Agency (EPA) to waive the nationwide ethanol mandate.

The EPA announced Monday that it will begin weighing requests for a suspension of the mandate, which requires that gasoline contain 10 percent ethanol.

The cost of corn and other crops has skyrocketed as conditions continue to worsen across the Corn Belt. According to the most recent report by the U.S. Drought Monitor, released Aug. 16, 87 percent of the corn-growing areas are experiencing some degree of drought, with more than half of those areas experiencing extreme to exceptional drought.

The crisis has prompted Democratic governors from Maryland, Delaware, North Carolina and Arkansas to join the agricultural industry in a push for a waive of the ethanol mandate.

The mandate was originally implemented to help decrease U.S. reliance on foreign oil. However, with corn in short supply, its use in ethanol is driving up food costs and lowering reserves even further.

"It's mandatory because of the law but it's possible that the government, if they chose to do so, could suspend that or lower the percentage to 7%, and that probably would relieve the pressure dramatically," Jim Dunn, Professor of Agricultural Economics at Penn State University, said in an AccuWeather interview last month.

Though the government has never before altered this mandate, the Congress and Senate are very well aware of the looming crisis, Dunn said.

Thus far, the Obama administration has not taken steps to waive the mandate, despite recent efforts to aid the farming industry.

On Aug. 13, Obama announced that the USDA would purchase $170 million of pork, lamb, chicken and catfish to help drought-stricken farmers recover from this year’s agricultural devastation and to counter the high cost of animal feed.

"The purchases will help mitigate further downward prices, stabilize market conditions and provide high quality, nutritious food to recipients of USDA nutrition programs," Tom Vilsack, Agriculture Secretary, said in a statement.

The EPA is gathering public comment on the need for a waiver for 30 days, while asking petitioners to demonstrate that the mandate is causing severe economic harm. The agency has until Nov. 13 to make a decision on the waivers.